Fee Examiner’s Report Shows Inappropriate Charges for Travel, Vague Entries and Staffing Inefficiencies by Legal Firms in Detroit Bankruptcy Case

Posted on March 19th, 2014 by Legal Fee Advisors

A first quarterly report issued in early February by court appointed fee examiner Robert Fishman shows that Fishman raised concerns early on in the case about numerous bills submitted by law firms in Detroit’s bankruptcy suit.[1]

Although Chapter 9 municipal cases do not require disclosure of legal fees (unlike Chapter 11), the Judge overseeing the case appointed Fishman to monitor costs.[2] Attorney Fishman, who himself is charging an hourly rate of $600, took issue with certain fees incurred by Dentons US LLP.[3] The firm had billed for reading or watching bankruptcy news reports, and per Fishman had claimed it was “compelled to respond to certain media efforts undertaken by the city and to ‘inform its constituents of its efforts and to influence certain case events.’”[4] Fishman rejected the explanation and also requested that the firm remove “certain charges related to envelopes.”[5]Another law firm eliminated $814 in travel agency charges after Fishman questioned certain invoices.[6]

The quarterly report also revealed that Jones Day, the lead Bankruptcy counsel, slashed its bills by $54,200 based on Fishman’s suggestions.[7] In particular, Fishman took issue with the firm’s use of half-hour intervals, vague billing descriptions and staffing inefficiencies, emphasizing that tasks could have been performed by lower level attorneys.[8]

Despite agreements to significant bill reductions by multiple firms, legal fees incurred in the case, since its filing in July of 2013, have been high- $13.75 million and climbing.[9] This is due in part to high hourly rates charged by many of the attorneys- two Jones Day partners charging $1000/hr and others billing only slightly less.[10]

The city’s willingness to pay Fishman’s legal fees reflect the potential efficacy of regular bill review, especially in lengthy and complex bankruptcy matters.

Interestingly, fee examiners have rarely been appointed in past Chapter 9 municipal bankruptcy cases, so Fishman’s employment may indicate a shift toward greater cost control measures, especially where taxpayers are footing the bill.

E. Bibelnieks

[1] Robert Snell & Chad Livengood, Detroit bankruptcy watchdog flags charges for travel, cars, envelopes among millions sought by firms, The Detroit News, (Feb. 5, 2014, 10:39 PM), http://www.detroitnews.com/article/20140205/METRO01/302050039#ixzz2urcC9M3z
[2] Steven Church, Detroit Fee Examiner Gets Paid to Second-Guess Bills, Bloomberg, (Oct. 21, 2013, 12:01 AM),http://www.bloomberg.com/news/2013-10-21/detroit-fee-examiner-gets-paid-to-second-guess-bills.html
[3] Snell, supra.
[4] Id.
[5] Id.
[6] Id.
[7] Sara Randazzo, Report Details Work Behind Detroit’s Big Bankruptcy Bills, The American Lawyer, (Feb. 5, 2014),http://www.americanlawyer.com/id=1202641734251/Report-Details-Work-Behind-Detroit%27s-Big-Bankruptcy-Bills#ixzz2urf63kjN
[8] Id.
[9] Snell, supra.
[10] Randazzo, supra.
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